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How to Get a Car Loan (The Right Way) - YouTube
Channel: Honest Finance
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so if you want to get a car loan without
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getting totally screwed then watch this
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video because I'm gonna teach you
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exactly how to get a car loan the right
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way financing a car is a big deal
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because if you don't do it the right way
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you're gonna lose a ton of money and
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you're probably gonna end up going
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upside down in your car now I bought my
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first car when I was 20 years old and I
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was so stupid because I got a $20,000
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loan for seven years at seventeen
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percent interest so please don't do what
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I did because I didn't do any research
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and I took a really bad advice for my
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friends on how to grow my credit and we
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all know that bad advice will always
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lead to really stupid decisions
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now I'm Jason with the honest finance
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Channel and I make a lot of videos on
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different financial topics so if you are
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interested in this type of content feel
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free to subscribe to the channel or at
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least give this video a like and now on
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to the content that you've been waiting
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for now I'll start by saying that
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financing a car is basically broken into
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three different parts but you've got to
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understand how these different parts
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work in order to not get screwed as the
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consumer we'll be looking at the amount
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borrowed the interest rate and the
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length of the loan those are the three
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different parts that you need to
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understand these three different numbers
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will determine what you can or can't
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afford as a monthly car payment so pay
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attention and just remember that a
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monthly payment doesn't determine what
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you can actually afford until you apply
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what I'm talking about now starting with
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the amount borrowed this will be your
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entire car purchase plus any taxes and
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fees and any money that's left from a
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previous car loan it's basically
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everything you need to borrow from the
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bank in order to purchase your car now
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make sure to do the research on the car
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that you're buying so that you can get
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the best deal possible and please don't
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pay full price for extended warranties
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or carpet cleaning anything like that
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because those prices are all negotiable
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just remember to get the best price
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possible on your car purchase and feel
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free and watching my car buying
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negotiation video if you need help in
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this area now as far as the interest
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rate goes this is just the amount of
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money that you have to pay back the bank
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in order to even have your car loan now
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in order to get the best interest rates
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you've got to have excellent credit or
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you've got to have a cosigner that has
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excellent credit in order to make it
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happen and if you are using a cosigner
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make damn sure that you can make your
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monthly payments every single month
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because if you're late just once you're
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gonna hurt their credit score and trust
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me they're gonna be pretty pissed when
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they go in to get a loan and they
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realize that you screwed their credit
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score the bottom line here though is
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that if you do have bad credit just
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stick with the cheap car so that you can
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actually make the payments and build
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your credit along the way or you could
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pay cash and save up like we used to
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back in the day you'll also want to have
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a down payment of about 10 to 20 percent
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to get the best rates and new cars will
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typically need about 20 percent down
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because of their fast depreciation I
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know that 20% down is a lot but you've
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got to understand that in order to get
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the best rates you got to make a few
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sacrifices if you have an existing car
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that you can sell just take those
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profits and use those towards your down
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payment and you'll probably have enough
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now if you don't have very much down you
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can at least see what the banks will
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give you because it's worth a try the
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best car loan interest rates are
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typically about 3 to 5 percent which
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will cost you about 30 to 50 bucks a
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year per thousand dollars that you
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borrow so if you're financing $20,000
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then you're gonna be looking at about
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600 to $1,000 a year in interest but
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that's on optimal credit and with a good
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downpayment and if you are given a rate
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that's higher than 5% then I would
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highly suggest working on your credit
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score or paying cash for the car so that
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you don't go completely upside down on
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it being upside down in your car means
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that you owe more than the car is
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actually worth and that is not a good
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thing
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cars naturally depreciate on their own
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which totally sucks but it is normal but
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just keep in mind that you don't want to
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be paying a ton in interest because you
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will go upside down in your car now when
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you decide to finance a car I would
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stick with just banks and credit unions
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because they always have the best rates
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just shop around online and I'm sure
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that you'll find a bank really quick and
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easy and please don't go with your local
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bank just because you know who they are
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because that doesn't always mean that
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they're gonna have the best rates just
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always go with whomever has the best
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terms because that's gonna save you the
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most money on your car loan now as an
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example I live in Utah and I actually
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financed a car once through a company
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Canada because they had the best rates
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and it was easy to just pay online
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dealers can also get you really good
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rates on car loans but just make sure
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that they don't get a cut of the
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interest rates and if they're not taking
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a cut and go ahead and use them because
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it's a lot easier and you probably only
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have to get your credit for at once and
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sometimes car manufacturers will even
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offer their own rates which are
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typically really good from about 2% to
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0% on new car purchases so if you're
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looking into a new car and they offer 0%
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financing and there's nothing funny
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about it
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then that is a seriously good deal now
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if you've made it this far into the
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video please give it a thumbs up to help
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me out because it's always much
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appreciated
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Thanks and finally let's cover the
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length of the loan which is the amount
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of time that you're gonna be making
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monthly payments until the loan is paid
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off
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just remember this the longer the length
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of the loan the smaller your car
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payments are going to be but just
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remember that the longer the loan is the
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more that you're gonna pay an interest
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and this is what you have to understand
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you have to understand this because
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banks and dealers will just increase the
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length of your loan in order to get your
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payment's where you want them so that
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you think you're getting a good deal the
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monthly payment is only important if
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you're following the three parts that
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I've been talking about now the length
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of the car loan should only be about 24
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to 60 months if you go with anything
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that's longer than the 60 months you're
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gonna see the interest rates increase
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and you're guaranteed to waste way too
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much money on your car typically the
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interest rates will go up about one to
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two points for every year you extend
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past sixty months and that's also for
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the customers with the best credit score
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so please don't do anything higher than
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five years so let's say that you buy a
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car for fifteen thousand dollars at a
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four percent interest rate for 60 months
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your monthly payment is gonna be about
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three hundred bucks a month for the next
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five years and you're gonna pay almost
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sixteen hundred bucks in interest over
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the life of the loan now let's pretend
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that we buy the same 15 thousand dollar
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car but this time you're gonna pay eight
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percent interest over eighty four months
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your payments now gonna be two hundred
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and thirty three dollars a month which
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is better than the two seventy six but
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this is all a lie because you're gonna
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pay a ton more an interest you'll now be
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paying about forty six hundred dollars
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in interest for the car loan and you'll
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be paying on it for the next seven years
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so now can you see why having a longer
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low
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is a bad idea it's all a big fat lie
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because your monthly payment might look
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good on paper but it's actually a total
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ripoff and after just a couple years I
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guarantee you you're gonna be upside
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down in your car and you'll still have
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five years to go on the loan did you
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know that the average car loan is 68
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months long at 4.2 percent interest for
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$30,000 borrowed those are really scary
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numbers because it proves that most of
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us are buying way too much car now I
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want to make a quick note here about car
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insurance before you go out and buy a
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car please call your car insurance to
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find out how much the new car is gonna
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cost you because if you're looking into
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some fancy 7 Series BMW and it costs you
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a hundred and fifty bucks more a month
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in insurance and it's probably worth
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looking into something else so just call
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your insurance before you buy a car so
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that you know how much more it's gonna
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cost and now after all of this
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information you know how to finance a
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car just make sure to get the best price
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for the car the best interest rate and
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make sure that you're only keeping a
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loan for 24 to 60 months and if you
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follow these three parts correctly I
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guarantee you you're gonna get the best
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financing possible for your car loan I'm
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Jason with the honest finance channel
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feel free to watch any of my other car
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videos if you're interested in this type
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of content or at least give this video a
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like that's all
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